Videocon Now A Glass Shell, Petro Firm: Dhoot

Consumer durables is no longer the principal business for the Rs 5,000-crore Videocon group.

Venugopal N Dhoot, managing director, Videocon International Ltd, said: "We are no longer a consumer durables company, but a glass shell company and a petroleum company." According to Dhoot, today 75 per cent of his company's business is in petroleum and glass shell, while consumer durables contribute the remaining portion.

Dhoot draws a parallel with Reliance Industries. "Reliance was a textile company but is today known as a petrochemicals giant. Similarly, consumer durables was the vehicle for us to reach infrastructure projects such as petroleum, apart from glass shells," he says.

 

Dhoot said Videocon wants to be a "backbone company for the consumer durables industry", by supplying glass shells and funnels to television manufacturers, compressors for refrigerators and motors for washing machines.

Pointing out that his group had already committed Rs 1,200 crore towards glass shell manufacturing, Dhoot mentioned, "We are getting internal accruals of Rs 1.5 crore per day from the glass shell division. Our main business is glass shell manufacturing from where the actual profits come from."

Currently the operating margins in glass shells are in the vicinity of 150 per cent. The installed capacity of the company's glass shell division as on March 31, 2001, was 3 million units.

Dhoot mentioned Videocon's presence in the petroleum sector as another case in point. According to him, the Ravva oilfield which currently contributes to 8 per cent of the total petroleum production in the country today was the largest contribution by the private sector.

The reason for this shift in focus is the increasing competition in the consumer durables industry. "Competition in consumer durables has led to a decline in margins. Five years back, we decided that staying confined to consumer durables was not a good option. Hence we decided that a technological industry like glass shell would be a safer option, and we are the only company of its kind in India at the moment. For others to set up such a company it will take another five years. Till then we will have no competition."

Industry estimates show that national players are losing ground to multinationals in consumer durables.

According to data, in 1994-95 multinational companies had an insignificant presence in categories such as colour televisions, refrigerators and washing machines.

Industry reports quote that, in 1994-95, Indian companies controlled nearly 90 per cent of the CTV segment. The big three local players, which included Videocon, BPL and Onida, accounted for 65 per cent of the total market. However, in Jan-Dec 2001, the three Indian companies have a combined share of just 38.7 per cent with BPL still leading with a 17.6 per cent share. It is followed by Videocon at 10.7 per cent and Onida at 10.4 per cent.

Today Videocon's share in the colour television segment is in the range of 10.7 per cent as opposed to a 1994-95 market share of 24 per cent. Videocon has been relegated to the second place after BPL.

Even in categories like washing machines where it had a market share of more than 50 per cent in 1994-95, industry reports say that Videocon's current market share is 28 per cent. But the company continues to be the market leader.